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The Small Business, Enterprise and Employment Act 2015 introduces a new publicly searchable beneficial ownership register, also known as the PSC (Persons of Significant Control) register. Will your business need to be on it?

From 6 April 2016 all companies and Limited Liability Partnerships (LLPs) are required to keep and make available for public inspection, a register of Persons with Significant Control (PSC).

From 30 June 2016 they will also need to include the information contained in this Register in a new form of Annual Return to be filed with Companies House, called the Confirmation Statement. (This replaces the current Annual Return).

  • A PSC register must be kept with the statutory records.
  • The PSC cannot be blank and must be available for inspection on request.
  • The PSC provisions apply to dormant companies or LLPs.
  • An Annual Confirmation Statement (the document which replaces the Annual Return) must be submitted to Companies House from 30 June 2016 this will include the PSC information.
  • Those seeking to incorporate a new company or LLP will have to send a statement of initial significant control to Companies House.

Who do the rules apply to?

In short, every incorporated entity must identify its PSCs.

There are exemptions for companies whose shares are traded on certain public markets (as they have existing disclosure rules) and for certain specialist entities such as Limited Partnerships and Charitable Incorporated Organisations.

And dormant companies?

Yes, even dormant comloanies have to hold a PSC.

Significance of 30 June 2016

Although it is a legal requirement to keep a PSC register from 06 April 2016, Companies and LLP’s will need to start making this information available at Companies House. New companies will need to provide this information on incorporation.

See: Companies House: PSC requirements for companies and limited liability partnerships

Companies House have announced that they are releasing a new version of the annual return forms AR01 and LL AR01 on 30th June 2016.

What do the old rules require?

The Annual Return required companies to provide a register of members – the shareholders – recording the strict legal ownership of a company, but this does not tell you who is actually in control of the company.

List of Members

Why change?

The government is seeking to improve transparency and increase trust in UK companies in the hope that more information on the public register will help to reduce criminal activity and make it harder to evade tax, fund terrorism and launder money.

What happens to the annual return?

The traditional annual return will no longer exist from 30th June 2016. Companies and LLP’s will be required to submit a Confirmation Statement instead.

How much will a ConfIrmation Statement cost to file?

The fees for filing the annual return (£13 online or £40 paper) remain the same for the confirmation statement.

Where must the PSC Register be held?

As with any other Statutory Register, the PSC Register must be kept available for inspection at the company’s registered office. It must also be available for inspection to anyone who might ask. Well, subject to the person making that request in writing and detailing the identity of the person or entity asking for the information and the purpose for which it is to be used.

Identifying a Person with Significant Control (PSC)

The Act identifies a PSC as an individual who ultimately owns or controls more than 25% of a company’s shares or voting rights or who otherwise “exercises significant influence or control” over the company or its management. So a PSC could be a director, shadow director, non-executive director, shareholder or manager.

A PSC is an individual who meets one or more of the following conditions:

Company LLP
1 Holds more than 25% of shares Holds rights over more than 25% of surplus assets on a winding up
2 Holds more than 25% of voting rights Holds more than 25% of the voting rights
3 Holds the right to appoint or remove the majority of the board of directors Holds the right to appoint or remove the majority of those involved in management
4 Has the right to exercise, or actually exercises, significant influence or control Has the right to exercise, or actually exercises, significant influence or control
5 Holds the right to exercise, or actually exercises, significant influence or control over a trust or firm (not a legal entity) which would satisfy one or more of conditions 1 – 4 if it were an individual Holds the right to exercise, or actually exercises, significant influence or control over a trust or firm (not a legal entity) which would satisfy one or more of conditions 1 – 4 if it were an individual

Companies House has recorded a really helpful video to help you identify people with significant control.

What is ‘Significant Influence or Control’?

A person has control over an entity if:

  • They can direct policies and activities
  • They can ensure the policies and activities that they want in place, are adopted

The right to exercise significant influence or control can exist where a person:

  • Is likely to receive more than 25% of LLP profits.
  • Has decision or veto rights over the business plan, the nature of the business, making additional borrowing or establishing a bonus or incentive scheme.
  • Has veto rights over the appointment of the majority of LLP management or company directors.

A person actually exercises significant influence or control if:

  • Their recommendations are almost always followed by those who hold the majority of voting rights.
  • They consistently influence or are consulted by management.
  • They use their relationships with the entity, for example ownership of assets, to influence decisions.

Being a designated member of an LLP or a company director, including one with a casting vote, would not by itself be an indication of a right to exercise significant influence or control

What happens if a company is owned by another company

A PSC by definition must be a person and not a legal entity i.e. not a company.

If a company (or LLP) is a wholly owned by another company rather than a person or persons then the PSC of the parent company becomes the PSC of the child company.  That legal entity is known as a relevant legal entity (RLE) instead of a PSC.

The RLE should be included on the childs PSC register if:

  • It meets any of the conditions 1 – 5 above, and
  • Is the first legal entity in the company’s ownership chain, and if
  • It holds its own PSC register or is exempt from holding a PSC register

 Filing exemptions

Exemptions are very limited, requiring the legal entities to be listed on a regulated UK or European Economic Area market, or be subject to Financial Conduct Authority disclosure rules.

Companies controlled by trusts

Where a trust or firm would satisfy one or more of the first four conditions if it were an individual. Any individual holding the right to exercise, or actually exercising, significant influence or control over the activities of that trust or firm.

How to identify your PSC or RLEs

If your company has a simple ownership and control structure, it will be obvious who your PSCs are. With most micro-companies – it will be your director/shareholders. If your company set up is more complex,then you may need to consider:

  • interests in your company held by individuals, legal entities and trusts or firms (partnerships without legal personality) – registers of shareholders, articles of association and statements of capital to see who holds company shares.
  • joint arrangements or voting rights held in agreements such as shareholder agreements
  • directors contracts with defined board voting rights

Creating your PSC Register

Your company’s PSC register must never be empty. When you are in the process of taking reasonable steps, this fact must be entered on your PSC register. The register must say that:

“The company has not yet completed taking reasonable steps to find out if there is anyone who is a registrable person or a registrable relevant legal entity in relation to the company.”

If you are confident that the company has no PSC or RLE, the register must say that:

“The company knows or has reasonable cause to believe that there is no registrable person or registrable relevant legal entity in relation to the company.”

 What information which should be recorded?

Official wording has been published which must be used on the entity’s own PSC register. This official wording must also be used when information is filed at Companies House.

The following details should be checked with the PSC and included on the register:

 PSC Register

#
1  Name
2  Date of birth
3  Nationality
4  Country, state or part of the UK where the PSC usually live
5  Service address
 6 The date he or she became a PSC in relation to the company (for existing entities the 6 April 2016 should be used as this is the date that the requirement to keep a register came into force.)
 7 Which conditions for being a PSC are met.

If conditions 1 and/or 2 apply –  the level of their voting rights, shares or rights to surplus assets on a winding up must be shown within the following brackets:

  • Over 25% up to 50%
  • Over 25% up to 50%
  • 75% or more
 8 Whether an application has been made for the individual’s information to be protected from public disclosure

The register should also include the PSC’s usual residential address, but this must not be provided when making the register available for inspection.

The following details about a controlling legal entity should be included on the register:

  • Name of the legal entity
  • Registered or principal office address
  • The legal form of the entity and the law by which it is governed
  • If applicable, a register in which it appears (including details of the state) and its registration number
  • The date it became an registrable RLE in relation to your company
  • Which of the five conditions for being a PSC it meets, with quantification of its interest where relevant

An entity which has no PSCs should still have a register and submit this to Companies House.

Steps for creating your PSC Register

 Plan of Action for PSC Register

# Action Templates (Clients and My Finance Dept Only)
1 Identify each of the persons who have significant control
2 Contact each PSC to confirm the prescribed details and their PSC status
3 PSC writes back with information requested

  • Warning notice – if PSC fails to reply, company may apply restrictions on shares or rights
  • Restrictions notice – If PSC still fails to reply, company applies restrictions on shares or rights
  • Withdrawal notice – issued when company chooses or is ordered by court to remove restrictions.
4 Update PSC Register
5 File PSC details at Companies House
     

Who is responsible for creating the PSC Register?

The directors or Company Secretary (if you have one) are responsible for creating and maintaining the statutory books.

Changes to the Register

When you become aware that someone has stopped being a PSC or registrable RLE you must record the date they ceased being a PSC of your company in your company’s own PSC register as soon as reasonably practicable and update the central public register at Companies House when you complete your company’s confirmation statement.

Record Retention

You must keep the information about the PSC on your company’s own register for ten years. Companies House will keep the information about them indefinitely.

The penalties of non-compliance

Both the company and a PSC will commit a criminal offence if the relevant information is not provided and there’s no defence available for an inadvertent or minor breach of the provisions.

Small print

The requirements to keep a PSC register are set out in Part 21A of the Companies Act 2006 (as inserted by the Small Business Enterprise and Employment Act 2015) and the following regulations:

  • The Register of People with Significant Control Regulations 2016
  • The European Public Limited-Liability Company (Register of People with Significant Control) Regulations 2016
  • The Limited Liability Partnerships (Register of People with Significant Control) Regulations 2016.

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